September 9, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Buy low, sell high is generally good advice for stock investments, but it’s never quite that simple. While some analysts think Gilead Sciences ’ stock is too slow to rebound others think it’s a good time to buy low. The same goes for Roche Holding (RHHBY). Chiradeep BasuMallick, writing for TheStreet, tells you why.
In terms of Roche Holding (RHHBY), BasuMallick says that, “With its core capabilities in pharmaceuticals and diagnostics, Roche is considered to be better equipped than many to drive personalized health care.”
About two-thirds of its research-and-development budget, 9 million Swiss francs, is based on companion diagnostics, which is to say, diagnostic testing associated with various drugs. It also has 17 compounds on the market, with drugs for breast, skin, colon, ovarian and lung cancers.
Although the company’s is currently trading for $239.70, down about six percent over the last 52 weeks, Wall Street analysts projected its adjusted earnings per share to grow an average of 8.4 percent per year for the next five years.
In addition, BasuMallick says, “Roche’s list of top-selling drugs (MabThera/Rituxan, Herceptin, Avastin, Perjeta and Actemra/RoActemra) and more than 100 potential molecules inching toward completion make it compelling.”
It’s also worth noting that for the eighth consecutive year, Roche was recognized within the Dow Jones Sustainability Index (DJSI) as a Group Leader in sustainability within the Pharmaceuticals, Biotechnology & Life Sciences Industry. As the company said in a statement, “This year’s DJSI assessment emphasized that by placing focus on access to healthcare, compliance and transparency, diverse work culture and collaborating with diverse partners, Roche is committed to creating value for all of its stakeholders.”
Gilead is probably a more difficult company to figure out. Its shares are down about 23 percent so far this year. Jefferies recently upgraded the stock to “buy” with analyst Brian Abrahams writing in a note, “We see a compelling buying opportunity in Gilead at currently-depressed levels.”
TheStreet’s Jim Cramer, on CNBC’s “Stop Trading” segment, however, pointed out that just because a stock is cheap doesn’t mean it’s going to improve. He didn’t see any obvious catalysts in the near-future to push Gilead stock higher.
BasuMallick, on the other hand, notes the company’s “impressive portfolio and its annual sales of more than $30 billion.”
In particular, its HIV and AIDS portfolio is strong and expected to become stronger. This is an area that Jefferies noted as well. BasuMallick writes, “The stock price drop this year in Gilead is principally driven by a wave of unjustified concerns surrounding its hepatitis C drugs and fears of shrinking margins thanks to competition from Merck and AbbVie . We’d recommend you ignore these concerns. Even if you assume that innovation at Gilead is at a standstill, the company with its $24 billion in liquidity is literally unstoppable.”
Johanna Bennett, recently writing for Barron’s, said, “Now fetching 6.7 times forward earnings, the stock trades as if the drug maker won’t grow revenue again, an unrealistic prospect given Gilead’s promising pipeline and $24 billion in cash sitting on its balance sheet that CEO John Milligan can use to fund acquisitions. Once a Wall Street darling, Gilead Sciences now resembles just about any old broken down biotech stock. Patient investors, however, are likely looking at a bargain.”
